IR35 review will not lead to 'significant' changes

Yesterday (7/1/20) the Government started its official review of IR35, which some believe due to its short time frame means “no significant” change can be made before its April implementation.

Susan Ball, a tax partner at RSM, a multi-national network of accounting firms believes the review will be very “limited” and that it may simply be a case of the Government “marking its own homework”. The IR35 review will be concluded by mid-February.

Ms Ball said:

The review appears to dash any hopes that there will be a change to the implementation date of 6 April 2020.

This poses a particular problem in that the final legislation won’t be available until the Budget on 11 March. When the existing rules were first introduced in the public sector in April 2017, the final legislation was only made available immediately prior to introduction. This caused implementation headaches for public sector bodies and contractors, and there’s a danger of history repeating itself here.

Crucially, the review will include the HMRC Check Employment Status for Tax (CEST) tool as well as exploring whether there are any further steps that could be taken to support organisations in correctly determining employment status. Even though the Government has recently launched a new version of the CEST, there remain concerns that it doesn’t fully take account of case law and appears to be weighted towards producing certain outcomes which aren’t always right.

It is still possible that some of the more onerous obligations of the new rules, such as the transfer of debt provisions, may be watered down ahead of the final legislation being issued, but those holding out for wholesale change are likely to be disappointed.

Nicola Hayman, legal manager at Kingsbridge Contractor Insurance agrees that it is too late in the day to bring about a thorough review. As well as giving a warning to people affected by the legislation to not stop preparing for it.

Mr Hayman said:

While we welcome the fact that HMRC has recognised a need to take another look at how these changes will be implemented, there is no escaping the fact that it is now too late for a thorough review of the proposed reforms.

Furthermore, the Government’s admission that the purpose of this consultation is to make ‘sure that the implementation of these changes in April is as smooth as possible’ confirms that any delay is extremely unlikely.

With this in mind, we are urging the businesses that we partner with to continue to prepare for incoming reforms – there simply isn’t time to wait for the outcome of the review and final legislation.

We are encouraged by the fact that, in its latest statement, the Government reiterated that the off-payroll working rules ‘do not affect the self-employed, as only those working like employees are in scope’. We also welcome the commitment that the review will also assess whether any additional support is needed to ensure that the self-employed, who are not in scope of the rules, are not impacted.

Tania Bowers, legal counsel at the Association of Professional Staffing Companies (APSCo),  was not taken back by the announcement of a review but was disappointed that there was no news of delaying the legislation.

Ms Bowers said:

While we are not altogether surprised by this announcement, we are disappointed that there is no intention of delaying incoming changes. APSCo has called for implementation to at least be delayed pending a further impact review and completion of an assessment on employment status. There is a clear need for a proper review, with adequate time to publish the outcome and recommendations of the review, and then roll out changes with certainty on final legislation. This timeline just doesn’t work.

 

 

 

 

Darius is the editor of HRreview. He has previously worked as a finance reporter for the Daily Express. He studied his journalism masters at Press Association Training and graduated from the University of York with a degree in History.